Economic Recovery and Home Equity Loans

[Jul 30, 2010.]

 

Where Home Equity Stands Today

The serious contraction of the housing sector of the economy has reduced home equity in the US by an estimated $7 trillion dollars. In 2005, home owners averaged about 60% equity in their homes; today, that figure is about 38%. The reduction in home equity is due primarily to a drastic decline in home values. While these numbers may seem bleak, they have improved this year over last. According to the Federal Reserve, homeowners are reducing their mortgage debt. Some homeowners are paying down their mortgages with cash and others are benefiting from a write-down by their mortgage lien holder. In some parts of the country, values have stabilized or even improved, increasing home equity. Whether by lower debt or by capital gain, home equity has improved.

When Will There Be a Pop in Values?

Since most of the government stimulus has run its course, the true legs of the housing sector are finally being tested. Economists expected to see a drop in demand for housing once the first time home buyer tax credit expired. Without the up to $8,000 incentive, new home sales plummeted in May. On the bright side, June new home sales numbers were very promising, showing a 24% increase month over month. But even though the numbers for June were great, a pop in value may be a long way away. According to Realty Trac, there are still a lot of foreclosures that need to cycle through the system before inventory regains a sustainable balance.

Home Loan Rates Are at an All Time Record Low

Freddie Mac started tracking mortgage rates in 1971. Since that time, home loan rates have never been lower than they are right now. Very low interest rates make mortgages cheap money.

Fixed-rate second mortgages and adjustable rate home equity loans are cheap loans, especially compared to most credit cards. There has not been a better time for cheap loans for home repairs, college tuition, or debt consolidation. If you have equity in your home that you'd like to access, speak to a home loan professional about new home equity loans today.

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.